Tech stocks tumble as investors look past Omicron disruption

Global tech stocks were reversed on Wednesday, as concerns over the Omicron variant of the coronavirus dissipated and bets on rising interest rates reduced the appeal of groups that thrived during the pandemic.

On Wall Street, the technology-heavy Nasdaq Composite stock index fell 0.8%, after closing down 1.3% in the previous session.

The larger S&P 500 stock index fell 0.2%, while the S&P information technology sub-index fell 0.9%. Among the worst performers were customer management software company Salesforce.com and Adobe, both of which fell more than 4%.

Research firm Gartner lost more than 3%, while chipmaker Advanced Micro Devices lost 2.6%.

The real estate components of the S&P 500 also fell 1.7% on Wednesday, after rising more than two-fifths collectively in 2021.

In Asian markets, Chinese tech groups traded on the Hong Kong Hang Seng Index closed 4.6%, their worst drop since July.

Tech stocks kicked off in 2022 after early data suggested Omicron was less likely than previous strains to lead to hospitalizations and therefore widespread blockages.

This surge of optimism has boosted the actions of companies such as banks and energy producers, whose fortunes are tied to economic growth, while raising expectations of an interest rate hike from the Reserve. federal government, which would put high-end growth equity valuations under pressure.

“The Omicron variant looks quite mild, with an increase in cases not resulting in higher deaths, giving hope that the end of the pandemic is in sight,” said Emmanuel Cau, head of European equity strategy at Barclays.

Major U.S. tech groups including Apple, Microsoft and Google’s owner Alphabet have been among the biggest publicly traded winners of the pandemic, as measured by growth in dollar market capitalization since January 2020, according to a study by the pandemic. Financial Times.

“The acceleration of [tech] earnings growth is now behind us, ”said Jim Besaw of US wealth manager Gentrust, despite“ staggering valuations ”.

In Europe, the Stoxx 600 stock index rose 0.1% while its technology sub-index fell 0.5%. ASML, the Dutch semiconductor equipment maker and Europe’s largest tech company by market capitalization, lost 1.4% after falling nearly 3% on Tuesday.

While the outlook for tech groups has been bolstered by lockdowns and other social restrictions, their valuations have also been flattered by ultra-low bond yields that lower the opportunity cost of owning growth companies that pay dividends. minimal or non-existent.

Traders also pulled back this week from US Treasuries, the preferred safe haven in times of economic uncertainty, lowering the prices of debt instruments and pushing their yields higher.

Officials at the Fed, which is ending its monetary stimulus in the era of the pandemic, expect the central bank to raise interest rates three times in 2022, according to projections released late from last year.

The yield on the benchmark 10-year US Treasury index, which moves inversely to the price of debt, fell 0.02 percentage points to 1.681 percent on Wednesday. It fell from around 1.5% on December 31.

“Even if global equities perform reasonably well this year, the US market will struggle,” said Paul Jackson, head of asset allocation at Invesco.

The FANG + index of 10 widely traded U.S. tech stocks represents more than a quarter of the S&P’s market capitalization, according to Bloomberg data.

Due to Big Tech’s dominance in the index, Jackson added, the S&P had “become a market that outperforms during economic downturns.”

Elsewhere in markets, Britain’s FTSE 100 rose 0.2% after gaining 1.6% on Tuesday, thanks to its heavy concentration of banking, energy and resources. The German Dax rose 0.6%, boosted by consumer and industrial stocks.

Brent crude rose 1.6% to $ 81.23 a barrel. The benchmark oil index fell to $ 69.28 in late December, depressed by Omicron concerns.


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